Dan Hannan MEP on the costs of the unseen
Interesting point by Dan Hannan MEP about the similarity between the economic impacts of Hurricanes and Socialism.
He argues in the clip below that the same flaw in the argument that Hurricanes which smash lots of things can benefit an economy because the construction industry gets a lot of repair work to do, is the flaw in the arguments for socialism and for a large public sector.
What the people who argue that a catastrophe can benefit an economy are usually missing is that the money which has to be spent on the repair work would otherwise have been spent on something more useful (unless there is a massive amount of slack in the economy, which in Britain today there isn't.)
Similarly the people who argue for the economic benefits of socialism and government expenditure usually miss, as the shadow chancellor did on the Marr show the other day, that the allocation of resources to these state activities usually crowds out other spending or activities (again, unless there is a lot of slack in the economy - same point applies.)
I would not go quite as far as Dan does in the video - I don't agree that being a socialist is like paying little boys to smash windows - but he's dead right that people who think a hurricane or natural disaster makes you richer and people who think socialism makes you richer are usually making the same mistake, which is ignoring what economists call the "opportunity cost" of the money being spent, e.g. the other opportunities represented by that money, what other things would have been done with it.
He argues in the clip below that the same flaw in the argument that Hurricanes which smash lots of things can benefit an economy because the construction industry gets a lot of repair work to do, is the flaw in the arguments for socialism and for a large public sector.
What the people who argue that a catastrophe can benefit an economy are usually missing is that the money which has to be spent on the repair work would otherwise have been spent on something more useful (unless there is a massive amount of slack in the economy, which in Britain today there isn't.)
Similarly the people who argue for the economic benefits of socialism and government expenditure usually miss, as the shadow chancellor did on the Marr show the other day, that the allocation of resources to these state activities usually crowds out other spending or activities (again, unless there is a lot of slack in the economy - same point applies.)
I would not go quite as far as Dan does in the video - I don't agree that being a socialist is like paying little boys to smash windows - but he's dead right that people who think a hurricane or natural disaster makes you richer and people who think socialism makes you richer are usually making the same mistake, which is ignoring what economists call the "opportunity cost" of the money being spent, e.g. the other opportunities represented by that money, what other things would have been done with it.
Comments
He gives more modern examples which are equally relevant.
There is a slight difference in that case because the Germans did get a lot of help from the USA in the form of Marshall Plan Aid, so the money which was doing the rebuilding was not coming out of their own pockets and they did not pay the opportunity costs for the Marshall Plan.
However, you are still right because it was the Marshall plan, not the bombing, which provided the benefit, and also because many other European countries also had their economies damaged by the war and received Marshall Plan aid to rebuild, and they had the same opportunity to use the same aid to build equally modern plants.